... Money and a medium of exchange are synonymous. I didn't say money and cow are synonymous. If all widgets are gadgets and all thingamabobs have gadgets, that doesn't mean all thingamabobs are widgets. I used money [a medium of exchange] to purchase a soda at the store. I exchanged a crate of shoes for a cow to trade for wheat, in this insance the cow was used as money [a medium of exchange]. Meh. Tomato tomata. I don't agree with the "commonly used" bit, but if that's how it's popularly used then I'll try to stick with it. I try to avoid pulling a "Noam Chomsky" on words. Edit: Most definitions I'm reading don't include "commonly used", but almost always includes a central authority. Poor definition, I'm sticking with Money = a medium of exchange. Has no bearing on bitcoin or it's legitimacy as money. As for "secured money", I addressed that in my opening post. Anyone, anywhere in the world can back bitcoins with gold whenever they want. It's silly though because bitcoins are immortal, can't be inflated, and can be backed up wherever and as many times as you want. It's just a mind game. The purpose for backing paper money doesn't exist with bitcoins. Bitcoins can be stolen, embezzled, and lost, but none of that is corrected by "securing" bitcoins as you have described. And "real money" isn't protected against it either.
Some definitions:
Great definitions. In fact, you've convinced me about the convinience of having a separate word for "by decree". I reject my previous fiat = unbacked definition. Maybe a definition of currency would be needed too.
Bitcoin - an unbacked, non-fiat medium of exchange. No government has ever decreed anything about Bitcoin so it can't be fiat.
Maybe this is a silly question. If some country accepted it for taxes/justice would it become fiat? What if it is THE ONLY currency that state accepts for taxes/justice? My point is...Is it necessary for a money to be a monopoly by decree or just being accepted by decree in some place make it fiat?
Couldn't bitcoin2, bitcoin3, ...bitcoinN defy the fixed base nature of bitcoin?
There's many forks already. Some of them do one have fixed base, some of them are even more scarce than bitcoin... But look at some of their prices. That very possibility of infinite currencies is what prevents them from growing. Only if they have a distinctive feature they have a competitive chance. Some of them don't even want to become a generally used currency, for example, namecoin serves to purchase domain names without the need to have a centralized authority that controls the market, and has been created only for that specific use (although, of course, nothing stops you from using it for something else).
That's an interesting point anyway. There was a lot of discussion in the btc forums about that, specially in relation with merged mining, but I don't want to bore you with technical details.
Who tries to profit from bitcoin?
Speculators?
Businesses accepting bitcoins?
Bitcoin exchange?
What about the person that created bitcoin, does he have any rights over its use?
Is there a way of knowing at all times how many bitcoins actually exist? Can a bitcoin be removed from the system and then be reintroduced at a later time?
"The best way to bail out the economy is with liberty, not with federal reserve notes." - pairunoyd
"The vision of the Austrian must be greater than the blindness of the sheeple." - pairunoyd
Anyone, anywhere in the world can back bitcoins with gold whenever they want. It's silly though because bitcoins are immortal, can't be inflated, and can be backed up wherever and as many times as you want. It's just a mind game.
You seem to have a more relaxed definition of backing than the rest. But I agree, I don't see how not being backed hurts the legitimacy or usefulness of it.
No. Although mining the first bitcoins was really cheap, because they were cheap.
All the users (and non users) can know at all times how many of them are in each address at any given time (the whole history of transactions), but addresses don't point to individuals, they're just like random strings. Each address has a key. If you lose the key of an address you lose the coins that were there FOREVER (In that sense is deflationary rather than having a fixed base). You can store that key in various places, write it on paper and even memorize it. Yet another advantage, you can't backup or memorize gold. And there's more fancy and unexpected technical superiorities over gold like this one.
@Seraiah:
@Lurkers: All monies are media of exchange, not all media of exchange are money. All cows are mammals but not all mammals are cows. When you go to a restaurant, you order beef steak, not mammal steak. Definitions matter. Money and "medium of exchange" are not synonymous. But, as Mises states in HA, this is irrelevant to the praxeological analysis. Hoppe explains in many of his online lectures why there can only be one, universal money (universally accepted medium of exchange) in an unhampered market in money production. Money is inherently monopolistic in the sense that the more people are using a particular money, the more benefit they all receive from using that money versus some other medium of exchange.
Bitcoin is not widely used. Therefore, it is not money and it is not in the running to become the money. Nevertheless, unbacked digital currencies definitely have the potential to act as a kind of black-market money, particularly as the noose of financial controls around the world is tightened.
The confusion over backing persists. A backed money-substitute requires a legal context where the backing is enforceable in court... holders of banknotes must receive pro rata compensation from the remaining assets of the collapsed bank. If the legal context does not enforce this, then backed currencies are simply impossible.
People are brainwashed by the fact of government funny-money. The fact that government funny-money is commonplace leads people to mistakenly believe that it has arisen naturally and is unremarkable. It only exists by very careful manipulation of the market and its continued existence crucially depends on this manipulation. Collapse of funny-money is what is unremarkable, just take a gander through history. The death-rate of funny-money is 100%. The USD is actually one of the oldest fiat currencies in the world, dating to 1971, an astounding 41 years old.
The most confusing aspect of funny-money is the fact that it looks like a money-substitute but it is in fact a money (medium of exchange). In an unhampered market in money production, money might be securely stored and bearer note warehouse receipts (money substitutes) exchanged hand-to-hand instead of the backing itself. This can only happen, as noted before, where the legal context enforces the rights of holders of titles to the securely stored money. There are economic consequences to this division (the money-substitutes are themselves a money as they are media-of-exchange) but the key is to realize their continued use is logically dependent on the legal context enforcing the rights of note bearers. No rights enforcement, no money substitutes. People switch to directly exchanging the backing despite the costs associated with that.
With unbacked, funny-money, the note is the money itself. It is not backed by anything except the continued use of the funny-money (demand for cash-balances denominated in that currency). Any government's unbacked, funny-money is liable to a collapse of confidence. If that happens, the value of the money will fall to essentially zero very rapidly and the government will issue a completely new funny-money. This has happened to nearly 100% of all funny-monies more than a few decades old. I remember coming across a webpage discussing the lifespans of fiat monies... I'll try to find it again if I get time.
The problem with unbacked digital currency as against government funny-money is that it doesn't even have a government forcing it on its subject population. Being purely voluntary, this makes it that much more unstable and liable to a collapse of confidence. In fact, I believe the only reason unbacked digital currencies are possible at all right now is exactly because the governments of the world have dramatically increased their cooperation in lock-step on financial controls across the board since 9/11. The fate of unbacked digital currencies is directly proportional to the success of the authorities in maintaining this financial lock-step. In the short-term, there are no signs of abatement.
Clayton -
With unbacked, funny-money, the note is the money itself. It is not backed by anything except the continued use of the funny-money (demand for cash-balances denominated in that currency). Any government's unbacked, funny-money is liable to a collapse of confidence. If that happens, the value of the money will fall to essentially zero very rapidly and the government will issue a completely new funny-money. This has happened to nearly 100% of all funny-monies more than a few decades old. I remember coming across a webpage discussing the lifespans of fiat monies... I'll try to find it again if I get time. The problem with unbacked digital currency as against government funny-money is that it doesn't even have a government forcing it on its subject population. Being purely voluntary, this makes it that much more unstable and liable to a collapse of confidence. In fact, I believe the only reason unbacked digital currencies are possible at all right now is exactly because the governments of the world have dramatically increased their cooperation in lock-step on financial controls across the board since 9/11. The fate of unbacked digital currencies is directly proportional to the success of the authorities in maintaining this financial lock-step. In the short-term, there are no signs of abatement.
I find that highly unlikely.
Currencies, even fiat currencies, don't simply suffer a crisis of confidence one day for no reason and disappear.
They disappear because they were inflated to death. And the people accepted it as long as possible because of the government mandate to use that currency, without which they'd use a more stable currency.
Bitcoin's inability to be inflated at all should protect it from a repudiation in perpetuity.
It may be the most perfect money that's ever been created precisely for this reason.
The only major problem with Bitcoin is that computer security is in its infancy and it's too easy to get hacked these days and lose your BC wallet.
This will change in time.
the people accepted it as long as possible because of the government mandate to use that currency, without which they'd use a more stable currency.
Nope and nope.
Money is inherently monopolistic
Are you saying that money is a natural monopoly? Doesn't that assertion legitimize fiat money?
No rights enforcement, no money substitutes.
What about mutual credit systems based on trust like LETS or Ripple? I guess that although they substitute money as a medium of exchange they don't qualify as money substitutes in the formal sense.
Any government's unbacked, funny-money is liable to a collapse of confidence. [...]
Any government's unbacked, funny-money is liable to a collapse of confidence.
[...]
Being purely voluntary, this makes it that much more unstable and liable to a collapse of confidence.
I disagree.
The reason why fiats fall is because if because of a collapse in confidence in the management of its supply. A fiat totally unbacked (only through taxes) money with a fixed supply (not that this has ever existed) should not fear the collapse that much. The reason why gold is more resistant to those kind of collapses is because no one can print gold, not because gold-money is backed by gold-commodity. And bitcoin can't be printed neither. Bitcoin will be more resistant to demonetization than fiats because of its fixed supply. You seem to assume that precious metals are completely inmune to that (if the demonetization is not caused by decree), but that's untrue. Money does ALWAYS depend on trust and faith. It's just easier to deposit faith in gold than in Ben Bernanke. But gold could be definitely be demonetized (and I believe it evetually will) in the future within a context of a free monetary market.
It surprise me the ease to use the term "intrinsic value" when is totally misleading. Ignoring how close that is from the Marxian "Labor theory of value". There's no such thing as intrinsic value, value is always subjective and you're supposed to have learned that from Mises.
http://mises.org/Community/forums/p/27611/453189.aspx#453189
People accept money because they want to exchange it for other goods and services. The price of gold would be much lower if it were completely demonetized (gold is still a functioning money despite what some peole may think), because it would depend only on its properties as industrial commodity. Gold is money because of its qualities as money not because it's shinny or a good conductor.
The first two sentences are correct, of course. [In fact they are taken from Mises.] But the third sentence does not follow from the first two, and indeed is a huge boo boo. The article on my blog called Bitcoin Takes a Beating explains why..
In fact, if you campare both monies only AS MONEY (ignoring the unimportant fact that gold-money can be "converted" into commodity-gold), it turns out that bitcoin is a superior form of money over gold. The value of bitcoin comes from its properties as money and it doesn't need anything else.
Mises wrote extensively to disprove exactly what you just wrote. See my aforementioned article.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
A few more places where respected Austrians, like Rothbard, use intrinsic value:
http://mises.org/Community/forums/p/21807/387244.aspx#387244
Again it has exchange value as money, that -is- its intrinsic value. It is not a commodity value, but it's still value per se.
Mises claimed he had a rigourous proof that bitcoin is garbage. It's called the Regression Theorem. Summarize it, please, so we are all on the same page, then show why it is either wrong, or does not apply to bitcoin.
May I suggest you go to my blog and read Bitcoin Takes a Beating.
Dave: Regression Theorum
Anenome:]Bitcoin's inability to be inflated at all should protect it from a repudiation in perpetuity.
jtimon:The reason why fiats fall is because... of a collapse in confidence in the management of its supply. A fiat totally unbacked (only through taxes) money with a fixed supply (not that this has ever existed) should not fear the collapse that much.
Clayton:not all media of exchange are money.
Clayton:All cows are mammals but not all mammals are cows
jtimon: You seem to have a more relaxed definition of backing than the rest.
Speculators? Yep. Just like with anything else, people will try to predict the market.
Businesses accepting bitcoins? There's a black market as well as various legal retailers. Bitcoin exchange? Mt. Gox is the most popular at the moment.
What about the person that created bitcoin, does he have any rights over its use? No.
Is there a way of knowing at all times how many bitcoins actually exist? Can a bitcoin be removed from the system and then be reintroduced at a later time? Yes, and no, respectively. Bitcoins are alway stored in the "Block Chain", you can lose the private key that would give you access to the bitcoin. If this happens the bitcoins will still be there, but no one will ever be able to access them.
I still dont understand how bitcoin can ultimately set itself apart from the me-too crypto-currencies.
Is the bitcoin name somehow protected? Could an exchange pop up that says it has bitcoins when it's really just another cryptocoin? When a business accepts bc (bitcoin), what makes it bc? Is it just because a certain set of networks transferred something THEY call bitcoin to the business owner or is there some other way to identify that piece of datum in and of itself? Where does its identity come from or how does it have an identity? Is its identity so because it came thru certain channels?
Personally, I'm all for each person deciding for himself what will serve as his money. I have PMs (precious mnetals) and am also interested in what's going on in electronic currencies. Though my questions come from a philosophic point of view, they also come from a personal economic point of view. I'm trying to determine the value of this category and of bitcoin itself. If it seems to have value beyond being a fad, then it makes sense to diversify into it as a way to weaken the current regime and as a way to gain financial independence.
even if the BC does prove to have significant value, I would continue to hold alternative physical money such as gold and silver. I'd consider it a diversification of infrastructure. There's coercion on the internet and on the streets. There could be times when an opportunity requires a physical exchange and times when it's best faciltated electronically.
Reality: Bitcoins is a cryptocurrency that is currently being used to facilitate trade.
You make it sound like nobody has ever raised that argument before, or refuted it.
Reality: It's been discussed at great length. [Hint: the fallacy in the argument is that three buddies in a college dorm who use baseball cards to settle their drinking accounts does not make baseball cards into a money, or even a medum of exchange. The key phrase to keep before your eyes is "generally accepted".]
You can either check my blog, searching for bitcoin [the comments may have some elaboration as well], or search here in the redoubtable Mises forum. It's been explain in both places.
Once you have figured that out, you can go back to what we are waiting for here, your refutation of Mises' Regression theorem. Do not disappoint us. Summarize it accurately, then refute it. Your place in economic history will be ensured.
Is the bitcoin name somehow protected? Sort of. The unit of account is authenticated and changes are authorised. The name itself is arbitrary. Could an exchange pop up that says it has bitcoins when it's really just another cryptocoin? No. The system authenticates bitcoins, the "Block Chain" can fork, but then the coins would not be spendable in the main fork. They'd be their own currency, like NameCoin. You cannot spoof a bitcoin, that is what the entire system was designed to prevent, and it has sofar proven itself very good at its job. When a business accepts bc (bitcoin), what makes it bc? It is verifiable through the Block Chain. When someone sends bitcoins to someone else's address the transaction is verified by other peers and added to the Block Chain, and at that point the reciever can look and ensure that he has recieved bitcoins. Is it just because a certain set of networks transferred something THEY call bitcoin to the business owner or is there some other way to identify that piece of datum in and of itself? Where does its identity come from or how does it have an identity? The Block Chain. Is its identity so because it came thru certain channels? Not really. It's a distributed authentication and authorisation system using "proof of work", hashing algorithms, private keys, and public keys. It's really difficult to explain all of this because I don't know where I'm starting at. There are many resources on google as well as youtube that will help you out tremendously. Bitcoins at the moment are a volatile investment, and you need to know how to keep them secure going in. In the long run I suspect Bitcoins is a very safe investment. Dave: the fallacy in the argument is that three buddies in a college dorm who use baseball cards to settle their drinking accounts does not make baseball cards into a money The baseball cards aren't a medium of exchange and were never intended to be. You can't just come up with some random item that isn't a medium of exchange, equate that item with Bitcoins, and then say you've won the argument. You haven't even made an argument. Have you given up the Regression Theorum debate and just moved on to non-arguments? You're not really working towards my prerequisite for reading your articles, so you shouldn't keep insisting. Bitcoins clearly can be theoretically a medium of exchange, and they currently are. Whether that's "money" or not is symantics and irrelevant. I'm not going to derail this debate into "How many vendors need to accept a certain medium of exchange for it to be considered money." By my definition, the moment something is exchanged for the sole purpose of exchanging for something else it is acting as money. Whether it's only done once between three people or by thousands of different people and vendors. If you have higher standards for a medium of exchange to attain the prestigious status of "money", I really couldn't care less. (And neither should you.)
Dave: the fallacy in the argument is that three buddies in a college dorm who use baseball cards to settle their drinking accounts does not make baseball cards into a money
I still dont see where the value of bitcoin comes from beyond it being in a craze or fad phase.
What is it about bitcoin that's difficult to duplicate?
A. You have the cryptocurrency.
B. You have the exchanges.
C. You have the demand.
How does one justify their demand for bitcoin based upon the presumably easily duplicated A and B? What is it about bitcoin that a very large number of others couldn't duplicate? Where's it's value?
Maybe it's there, I don't know.
If bitcoin isn't ultimately successful, I do hope that this experiment yields dividends for the journey to a successful alternative currency.
Maybe the bitcoin is the invention of the carriage before the horse. Maybe as time goes by we'll see that the currency is just a part of many divisions of labor. I think there's something missing in this currency model.
pairunoyd:I still dont see where the value of bitcoin comes from beyond it being in a craze or fad phase.
pairunoyd:What is it about bitcoin that's difficult to duplicate?
pairunoyd:A. You have the cryptocurrency. B. You have the exchanges. C. You have the demand. How does one justify their demand for bitcoin based upon the presumably easily duplicated A and B? What is it about bitcoin that a very large number of others couldn't duplicate? Where's it's value?
Ive used these forums many times and I know how to quote people, but with this new computer Ive having problems using all of the tools. It mentioned something about my security settings when I tried to use a feature (cant remember what feature. I was about to pass out asleep). Any help?
Sure I'd accept them for my socks. But if people were valuing doodoo at $100/lb I guess Id take that too. I understand that there is value because subjectively people have placed value upon it. However, I don't see how it could withstand the vicissitudes of the market. It makes me think of the dot com bubble, the housing bubble, etc. But like I said, I am NOT anti-bitcoin and I absolutely love it's origin, but I can't see myself regularly using it as currency. I could see trying to make something from the speculation.
If there is a further implosion in the fiat currencies of the world, I could see people in their searches for safe havens and convenience of transactions, going to bitcoin. I'm going to read further on the pros and cons.
Do you have any links to good debates, debates that answer some of the questions brought up here and also debates that answer the technological questions?
Thank you
Mises own quote, from your own blog, showed that money has intrinsic value as money. Until you address that, I see no need to continue with you.
@Seraiah: You're all over the map. A medium of exchange is just any good that is used to enact an indirect exchnage. For example, let's say you have milk and you want to barter for my bacon. But I want butter, not milk. So, you instead exchange your milk for some butter with someone else, then exchange that butter for my bacon. You never wanted butter and you didn't exchange your milk for butter because you "temporarily wanted butter"... you used the butter to mediate an indirect exchnage.
Pay attention!
Clayton, I haven't disagreed with any of that, I think you're misreading me. All I've said is I think the "commonly used" portion of your definition of money is a useless qualifier. Using the word "commonly" doesn't work in a quantitative sense and therefore shouldn't be used in any definition. I therefore would remove that qualifier and leave money as synonymous with a medium of exchange. It removes any confusion in the use of the word. Money = a commonly used medium of exchange. <- That's it! I understand that you and Dave don't like that definition and feel like "money" should be only used to refer to something that has reached an arbitrary point on a popularity scale. Hence, I have tried my best to use "medium of exchange", despite my objections. You and Dave insist that Bitcoins are not money because they haven't reached your particular standards for "money". Fine, whatever. If we can agree that Bitcoins are a legitimate way to mediate an exchange for any good or service, can retain value, are scarce, have no industrial and little aesthetic purpose, could potentially replace any currency in the world, and are anonymous, then I don't care what you want to call them. (I'd call it money.)
Anenome:Until you address that, I see no need to continue with you.
Seraiah earlier: "The baseball cards aren't a medium of exchange and were never intended to be."
Seraiah now: "I haven't disagreed with [the definition of a medium of exchange]"
The baseball cards are not being exchanged for their own sake but in order to purchase something else (settlement of drinking tab debts).
All I've said is I think the "commonly used" portion of your definition of money is a useless qualifier. Using the word "commonly" doesn't work in a quantitative sense and therefore shouldn't be used in any definition. I therefore would remove that qualifier and leave money as synonymous with a medium of exchange. It removes any confusion in the use of the word. Money = a commonly used medium of exchange. <- That's it! I understand that you and Dave don't like that definition and feel like "money" should be only used to refer to something that has reached an arbitrary point on a popularity scale. Hence, I have tried my best to use "medium of exchange", despite my objections.
Money = a commonly used medium of exchange. <- That's it!
I understand that you and Dave don't like that definition and feel like "money" should be only used to refer to something that has reached an arbitrary point on a popularity scale. Hence, I have tried my best to use "medium of exchange", despite my objections.
How original of you to think of this without having clicked and read Mises in HA defining media-of-exchange and saying that we don't need to use "in common use" for praxeological analysis.
But what you're missing is that the current state of affairs where there are hundreds of "competing currencies" is inherently unnatural as Hoppe explains here. The key issue is that money is inherently eliminative. This is in contrast to other goods, such as cars or houses where variation is a key attribute of such goods. There are many different kinds of cars becuase there are many different kinds of transportation needs, and so on. But money, by its very nature, becomes more useful the more widely used it is so that the incentive is for users of monies which are "losing" the race to become the universal money to switch and join ranks with the users of the one, soon-to-be universal money.
Hence, there is no natural sense in which there are many kinds of money, each filling some small niche or serving some specific market. Rather, one medium-of-exchange will become so universally used and accepted in payment that there can be no doubt what is meant by the otherwise vague word "money." Hence, there is no threshold at all, there is simply a criterion. Is this medium-of-exchange the most widely acceptable, that is, universally acceptable medium-of-exchange? If it is not, then it is not money. Money is that one medium-of-exchange that is more widely acceptable than any other.
That's just quibbling, Clayton.
Cans of sardines can be money if they're used to facilitate a single transaction between only two people.
If it's a medium of exchange, it's being used as money, and no qualifier of wide acceptance can change that.
No, it's not. Watch the lecture and get back to me. It's endemic to the econnomic account of how money arose in the first place. Why aren't we still bartering? Answer that question and you'll also understand why there can be only one, universally accepted medium-of-exchanged called money.
Clayton:The baseball cards are not being exchanged for their own sake...
Clayton: Why aren't we still bartering? Answer that question and you'll also understand why there can be only one, universally accepted medium-of-exchanged called money.
Dave: Once you have figured that out, you can go back to what we are waiting for here, your refutation of Mises' Regression theorem. Do not disappoint us. Summarize it accurately, then refute it. Your place in economic history will be ensured.
Am I missing something here?
That's what I've been saying...
There's no indirect exchange here.
Go back to my initial illustration of exchanging milk for butter in order to exchange the butter for bacon. That is indirect exchange. The butter is the medium or mediating good in the exchange.
*NEWS FLASH*, there are a ton of different kinds of money in the world.
Why are you repeating what I said back to me as a news flash? There "are a ton of different kinds of money in the world" and that situation is the result of central banking (government intervention in the market). More than 100 years ago, there was one, global money called gold. That situation has been dismantled with the rise of central-banking.
There is no universally accepted medium of exchange at this time, heck not so long ago there used to be a ton of different competing currencies even from State to State in the United States.
Gold- and silver-backed banknotes are money-substitutes. There is no reason you can't have many kinds of money substitutes. But money proper is eliminative.
for obvious reasons
I don't think anything in this discussion can be left unspecified as "obvious". You are deeply confused about even basic definitions.
Clayton:there can be only one, universally accepted medium-of-exchanged called money.
Clayton: You are deeply confused about even basic definitions.
Seraiah: I'm not going to derail this debate into "How many vendors need to accept a certain medium of exchange for it to be considered money."
Clayton: How original of you to think of this without having clicked and read Mises in HA defining media-of-exchange and saying that we don't need to use "in common use" for praxeological analysis.
I'm sure someone mentioned this already, but I havent read the thread. OP, you forgot the characteristic of money that all non-austrians forget: it has intrinsic value which manifests as market value for purposes other than money BEFORE it is used as money.
Clayton's basically defining money as a commodity :P Now paper certificates can't be money. Okay Clayton, whatever you say.
As for Hashem, while moneys in the past tended to be drawn from commodities, it's true for practical reasons, not principled ones. There are several moneys that did not arise from commodities at all, such as the cowry shell or the giant ten-ton boulders of some pacific islanders, both used as money with no commodity value, not even for art.
The reason commodity money has tended to be used as money is because its nature as a commodity makes it relatively safe from large fluctuations in price, especially inflation.
That said, a cryptographic limit on supply is a far better mechanism to create value protection against inflation than being a commodity. It's a situaiton that would've been unthinkable even 10 or 20 years ago before Bitorrent came out and the arrival of P2P concepts generally.
Let's say you wanted to obtain some gold to use as a commodity money. You buy the gold, some $1600 an ounce or w/e.
Let's say you want to obtain some bitcoin to use as money, you buy the bitcoin, at w/e its current price.
Ultimately we don't need to win this argument, because bitcoin will undoubtedly continue to be used as money just fine, despite everyone's carping that it isn't money, when it's clearly being used as money. Keep citing theories and economists that were formulating their concepts before the creation on P2P.
As with so many things, practice will come first and theory will follow after. But the biggest factor against anyone arguing against Bitcoin is that Bitcoin is in use right now as money. Your theories of why it's not money isn't today explaining why bitcoin failed as a currency and why no one is using it, rather your theories are flying in the face of actual use.
You are like Sir Thomas Gresham, claiming sandwiched coins can't be money and the people will revolt and reject the currency, only to discover the exact opposite is happening.
If we can agree that Bitcoins are a legitimate way to mediate an exchange for any good or service,
Any thing the two parties agree on is legitimate, yes.
can retain value,
Bitcoins cannot retain value because they have no value in the first place.
are scarce,
Not sure about this one. But it doesn't matter.
have no industrial and little aesthetic purpose,
Glad we agree on this one. But we disagree on the significance of this crucial fact.
Again, you have yet to refute Mises' Regression Theroem. Let's make one thing clear. Mises' theorem does NOT say bitcoin will never be used by a few people for a limited number of transactions per person. [After all, in a world of billions of people, some of them will be eccentric]. That is not what his theorem is saying at all.
What he is claiming is that it will never be commonly accepted.Thus your saying that a few people use it already for a few very limited things is not relevant. You cannot buy anything for sale in Walmart, say, with bitcoin, only a few odds and ends. Also, people who use bitcoin do not use it for all ot most of their business. Their wallets are still packed with dollars, which they use in over 99% of their transactaions.
could potentially replace any currency in the world,
No. Again, show us your disproof of the theorem.
and are anonymous,
not sure about htis one either. But again, it is not relevant.
then I don't care what you want to call them. (I'd call it money.)
You make it sound like "commonly accepted" is some weird Austrian definition of money, that you are in the mainstream with your calling it money. But the fact is that you are using some weird defintion of money that no one else uses. It's like you are proving that squares are round by calling circles squares.
Let's go to wikipedia on money, where the very first thing they write, which they back up with three sources, is this:
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country.[1][2][3]
Generally accepted. Generally accepted. Generally accepted.
So I hope we can agree on the following.
1. You have erred in your understanding of what money is.
2. You have erred in your understanding of what Mises' Theorem states.
3. Mises' theorem has not yet been refuted.
4. Trying to refute it is like trying to find a way squaring the circle with straightedge and compass, i.e. impossible.
WALL OF TEXT INCOMING. TL;DR: Dave doesn't respond to rebuttals and then says I don't make good arguments. I think he's wrong and a meany face.
Dave:Bitcoins cannot retain value because they have no value in the first place.
Nothing in the entire universe has value “in the first place”. Humans place value on objects (and even units of account.) because of their own needs and desires. Bitcoins, through very unique properties, fulfill a desire and therefore are valued. Because they are valued by many people, they can be exchanged for goods and services. As long as Bitcoins fulfill’s the desire of a decentralized, deflationary, and easy/cheap to transfer currency better than anything else, it will retain value. There is no competitor currently on the horizon.
Dave:Again, you have yet to refute Mises' Regression Theroem.
Dave:What [Mises] is claiming is that it will never be commonly accepted.
That is not what he’s saying, and there’s no theoretical reason why this would be true. As I’ve said, you’re misusing the Regression Theorum.
Dave:not sure about [the anonymity] either.
Some people argue that it’s not anonymous because if you transact online you need to provide a shipping address. That’s pretty silly for two reasons. 1.) Every other method of payment online provides an enormous amount of personal information. 2.) The Bitcoin system itself does not impart any knowledge to the recipient.
Dave:Money is an object or record that is generally accepted…
Dave:1.) You have no idea what money is.
Dave:2.) You have no idea what Mises’ Theorem states.
Dave:3.) Mises’ Theorem was not yet been refuted. 4.) [Impossible to refute!]
Dave:What arguments does he present?
Seraiah’s arguments thusfar; Argument: People complain about Bitcoins not being backed by a commodity, but there’s nothing preventing people from backing Bitcoin with whatever they like. Rebuttal: People would just exchange Bitcoins for the backing. Response: The backing is necessarily less valuable than Bitcoin because of Bitcoins unique attributes. Argument: Bitcoins have value based on mutual voluntary exchange throughout society. Certain people see that Bitcoin has attributes that they value for a certain function. This is exactly how everything else attains value, including gold. Rebuttal: Bitcoins have no value to begin with. Response: Neither does gold. Argument: If nearly worthless paper can be a medium of exchange, Bitcoins can be a medium of exchange. Rebuttal: The paper money is secured by government manipulation. Response: Bitcoins do not require security since they do not share the disadvantages of fiat money. (Specifically: Inflation.) Argument: Since Bitcoin is currently being used as a medium of exchange, that’s proof that it’s useful for more than just speculation. It’s also proof that it can be used as a medium of exchange… Rebuttal: Settling drinking debts with cards doesn’t make the cards money. Response: Pardon? Argument: The best way to create a theory is to make observations and work from there. Rebuttal: This doesn’t apply to Geometry or Number theory. Response: Geometry and Number theory were created in exactly this fashion. Argument: It doesn’t matter if Bitcoins are classified as “money” if they’re used as a medium of exchange that has better attributes than the prevailing currency. You can call it what you like. Argument: Fiat money is a highly inflatable centrally controlled currency. It always arises out of a commodity money because its utility as money is less than the commodity money. (Hence the Regression Theorum Dave obsesses about.) The Regression Theorum doesn’t apply to Bitcoin because Bitcoin is not a fiat money. Argument: Bitcoin is anonymous since it does not transfer personal information in any transaction. Argument: “Money” is synonymous with “a medium of exchange.” Rebuttal: “Commonly used medium of exchange” is how the word is popularly used. Response: That definition doesn’t make sense since “commonly” is subjective, and by the way that isn’t a popular definition. Rebuttal: Well actually money proper is only gold and silver, only one money proper can exist. Response: Since gold and silver are different commodities, clearly more than one “money proper” can exist, and on top of that there are a ton of other competing currencies that are accepted to varying degrees all over the place. Rebuttal: Well actually the definition of money is a “Generally accepted medium of exchange…” Response: That’s a very different definition, but still vague as it doesn’t clarify the geographical location, population requirement, or what you call all of the other things that are generally accepted. (Gold, Silver, and various fiat currencies –local and national-.) The definition is unnecessarily confusing, but still doesn’t affect Bitcoins in any way.
Dave: What arguments does he present.
As for Hashem, while moneys in the past tended to be drawn from commodities, it's true for practical reasons, not principled ones. Except, all the characteristics of money are practical ones, it has nothing to do with a persons opinion on principles, these are the objective facts regarding money hashed out by geniuses over time. The necessity for money to have market value apart from and prior to it's use as money is entirely relevant.
I'm not saying bitcoin has no place, even though I think it's a scam. What I am saying is that it's not properly money, in this sense it's fiat. It works to the extent that people play along, whereas money is always valued.
Hashem: The necessity for money to have market value apart from and prior to it's use as money is entirely relevant.
Clayton's basically defining money as a commodity :P
Try to keep up... I defined money as the universally acceptable medium-of-exchange.
It follows from very simple praxeological arguments - given by Hoppe in the above-linked lecture - that no money can arise in the unhampered market in money production that does not already have a value by virtue of its non-monetary uses. That money must have non-monetary value is not a definition, it's a conclusion of a praxeological argument. If you want to disagree, disagree. But don't pretend you're merely disagreeing with a definition, you're disagreeing with a praxeological argument which rests on basic assumptions (humans act, division-of-labor leads to greater social and individual wealth, etc. etc.)
Seraiah’s arguments thusfar;
Your re-wording of mine and Dave's arguments are mostly strawmen or red-herrings. Try direct-quoting, not only does it increase the audience's confidence that you're not distorting our arguments, it helps you make better arguments.
necessarily less valuable
This phrase contradictions STV.
Rebuttal: The paper money is secured by government manipulation. Response: Bitcoins do not require security since they do not share the disadvantages of fiat money. (Specifically: Inflation.)
Response: Bitcoins do not require security since they do not share the disadvantages of fiat money. (Specifically: Inflation.)
Paper money isn't secured by government manipulation, its existence is a unique historical artifact created by an original act of government manipulation. In Somalia, for example, the Somali shilling has been used from 1993 to the present despite the fact that the country has been in a de facto state of anarchy during this period. There is no prevention of counterfeiting. Anyone who wishes may print up their own shillings and exchange them on the market. So, you don't need active participation of a government to keep a paper money going once it has been started.
Where the government involvement is crucial is during the advent of the paper money. In an unhampered market in money production, it is impossible to print up paper money and exchange it for thins of real value, cf the Hoppe lecture linked above. However, the government is in a position to create incentives for people to exchange its paper money for real goods and services.
The fact that Bitcoins can be exchanged for real goods and services is a symptom of the fact that the market in money production is not unhampered.
Argument: The best way to create a theory is to make observations and work from there. Rebuttal: This doesn’t apply to Geometry or Number theory. Response: Geometry and Number theory were created in exactly this fashion.
Rebuttal: This doesn’t apply to Geometry or Number theory.
Response: Geometry and Number theory were created in exactly this fashion.
Wha?!? So now number theory is an empirical science???
Mises own quote, from your own blog, showed that money has intrinsic value as money.
Someone doesn't know how to read a blog. Please quote for us where Mises or my blog says such a nonsensical thing. Hint: You are making the same old mistake all the bitcoin people make, confusing intrinsic value with value as a medium of exchange. Mises goes to great pains to make clear the difference between the two.
Until you address that, I see no need to continue with you.
That's fine with me.
So bottom line the defense of bitcoin against the regrssion theorem is three fold.
First, bitcoin is so convenient to use when buying and selling stuff. This gives it intrinsic value, and so the regression theorem is OK with bitcoin.
Second, a handful of people buying a handful of things with bitcoin makes it a legitimate currency, by defintion, right now as we speak. Thus Mises regression theorem is disproven by the real world, where bitcoin is a money. There is therefore no need to refute the theorem logically.
Third, Mises was not talking about digital money, which did not exist in his days. Thus the train of abstract logical reasoning he builds does not apply to digital money.
OK guys, if you are happy with that kind of thinking, go ahead and party.
Hints for my rebuttals, to those interested.
To first one, reread my blog Bitcoin Takes a Beating, slowly and carefully.
To second one, reread the wikipedia article about Money, slowly and carefully. Understand that Mises explicitly uses wikipedias definition as well, and so his proof that bitcoin cannot be a "money" is proof that it will never be generally accepted, or commonly accepted. Indeed, careful reading and understanding of his argument shows exactly that.
And although the precise dividing line of when something is generally accepted is not clearly drawn, it still gives us useful info. For example, if a certain mama tells her girl to make sure she marries a rich man, she has not given a precise number, has she? And yet it teaches the girl not to marry a homeless, disease ridden crippled alcoholic with not a penny to his name. That guy is bitcoin. Stay away from him.
Third one is just silly. It's like saying the laws of physics discovered by Isaac Newton do not apply to automobiles, which did not exist in his time.
Clayton: necessarily less valuable This phrase contradictions STV.
Clayton:The fact that Bitcoins can be exchanged for real goods and services is a symptom of the fact that the market in money production is not unhampered.
Clayton:Wha?!? So now number theory is an empirical science???